For President Donald Trump, the stock market has traditionally been the go-to indicator of economic health. But for Elon Musk, the leader of the Department of Government Efficiency (DOGE), a different metric has taken center stage—the 10-year Treasury yield.
Musk’s Theory:
- Lower Treasury yields = DOGE’s cost-cutting is working.
- Reduced government spending = Less debt burden = Market confidence in the U.S. economy.
- Falling yields = Cheaper borrowing for Americans (homebuyers, businesses, and investors benefit).
Recently, the 10-year yield has fallen by nearly 30 basis points, seemingly validating DOGE’s efforts. However, market analysts say the decline has little to do with DOGE and more to do with growing fears of an economic slowdown.
Why Are Treasury Yields Actually Falling?
Market experts point to slowing economic growth—not DOGE—as the real driver behind the drop in yields.
Key Economic Indicators Flashing Warning Signs:
- Q4 GDP growth slowed.
- January retail sales were significantly weaker than expected.
- ISM data shows a slowdown in U.S. manufacturing.
Morgan Stanley analysts note that the market’s reaction to weak data has shifted. Previously, bad news was good news because it meant the Federal Reserve might cut interest rates sooner. But now, investors are viewing weak data as a real economic risk, leading to a flight to safety in U.S. Treasury bonds.
Jay Hatfield, CEO of Infrastructure Capital Advisors, explained to Business Insider:
“The recent move down … has been driven by weak economic data including slowing Q4 GDP growth, very weak January retail sales, and slowing ISM data.”
This economic uncertainty—not DOGE—is what’s pushing investors into Treasurys, lowering yields in the process.
DOGE’s Role in the Economic Slowdown
Some economists argue that DOGE’s rapid government downsizing is itself contributing to the economic slowdown.
Morgan Stanley’s Chief U.S. Equity Strategist, Mike Wilson, stated:
“DOGE is off to an aggressive start, and this is likely a headwind to growth initially, as Federal spending and headcount is reduced.”
Torsten Sløk, Chief Economist at Apollo, warned that:
- DOGE’s federal job cuts could result in nearly 1 million total job losses across the economy.
- Higher unemployment could weigh on consumer spending, corporate earnings, and market confidence.
Key Risks of DOGE’s Cost-Cutting Approach:
- Fewer federal jobs → Higher unemployment claims.
- Lower government spending → Reduced demand in the private sector.
- Uncertainty around policy → Businesses delay hiring and investment decisions.
If job losses accelerate, the economic slowdown could intensify, forcing the Fed to adjust its rate policy faster than expected.
